Infrastructure spending and public service job cuts dominate the story, key insights for advisors can be found in the details
The federal budget announced Tuesday afternoon comes with a lot of big picture items, capital investments, productivity incentives, and cuts to public service jobs. It also comes with a $78.3 billion deficit for 2025-26. With its focus on large scale projects and investments, the budget is light on individual tax incentives, affordability measures, and the changes to capital gains tax structures that some had hoped for going into the budget announcement.
"The Federal government 2025's budget is a step in the right direction, with investments in key infrastructure projects and some easing in the tax burden of businesses,” says Sébastien Mc Mahon, Chief Strategist at iA Financial. “It however falls short of implementing the kind of measures that would substantially lift private investment, instead relying on a healthy dose of wishful thinking, while leaving Canada on a weaker fiscal footing."
Despite the relative dearth of items that will immediately impact clients’ financial plans, a few areas do stand out. Guerlane Noël, Assistant Vice-President, Tax and Estate Planning at Mackenzie Investments, highlighted a few areas around registered account simplification as well as small tax incentives for lower income Canadians.
“From this budget, the measures are really related, I would say, to the middle class in terms of helping them reducing their overall taxes,” Noël says. “I know that a lot of advisors would be looking for maybe a measure that could help a high net worth individual, but this is not the type of budget that we had announced today at all.”
Noël says that her firm was “surprised” by the lack of measures tackling individual and corporate tax and affordability. She contrasts that with the capital gains increase that was announced in the fiscal update in late 2024. While that measure was unpopular, especially among advisors and their clients, and eventually removed by the Carney government, she expected that there may be some reform to that tax system to better incentivize investments in Canada, though no such reforms were present in this budget.
There were a few areas of note that Noël believes advisors should be looking the establishment of a new tax credit for eligible healthcare workers to a maximum point of $1,100. There has been less clarity on exactly which healthcare workers might qualify for this credit, but it could be another tool for advisors serving clients who work in that space.
Another measure in the budget Noël highlights is the proposal of, and request for commentary on, an automatic federal benefit for lower income individuals. Given that lower income individuals tend not to file tax returns, often resulting in unclaimed benefits, this process might alleviate some issues. However, Noël notes that some of those individuals might be discovered to owe additional taxes through this process, which may be disadvantageous.
The lowest income tax rate is also set to be dropped from 15 per cent to 14 per cent as of 2026. Noël notes that this would also come with a non-refundable top-up tax credit. This budget would ensure that the tax credit doesn’t artificially move an individual into a higher tax bracket and increase their liability.
There is also a proposal to close loopholes around international corporate taxation in the budget. This change in rules around transfer pricing and income allocation within multinational corporations, Noël says, may affect advisors working with cross-border businesses.
Perhaps the most notable proposal for the advisory business, according to Noël, is a push to simplify qualified investments for registered plans, including RRSPs, RRIFs, TFSAs, RESPs, RDSPs, FHSAs, and DPSPs. The budget proposes a simpler, harmonized set of qualified investment rules for these accounts, eliminating areas of duplication and complexity. It would also change some categories of qualified investments that do not involve registration. It’s one area where Noël sees real promise for advisors.
“I think [advisors] should be embracing this simplification because this is, when you're looking at that definition, it is so complex,” Noël says. “Even I, as a tax specialist, reread these rules over and over again. It's very complex, and for the average investor, it's almost impossible for them to follow those rules. So this was the good news.”
